As health insurance and health care costs continue climbing, some employers are taking new and innovative steps to tamp down costs for themselves and their covered employees while not sacrificing the quality of care they receive.

Some of the strategies require a proactive approach by engaging with their broker and insurer, and even local health care providers, efforts that may be hampered by location and how flexible insurers may be. The goal for these employers is to reduce their and their employees’ costs and improve health outcomes.

The following are some strategies that employers are pursuing.

Steering workers to certain providers

One way to reduce spending is to contract with insurers that guide patients to facilities and providers that are more affordable and who have good patient outcomes. This process, called steerage, if executed correctly can save the employee money on their deductibles, copays and coinsurance and help them get better overall care.

For standard services, this steerage can help your employees see immediate savings on small payments. But for services that require pre-authorization, such as an MRI or X-ray, the insurer can help steer them to the least expensive provider. The differences in cost for these pre-planned services can often be hundreds of dollars, if not more.

Even guiding workers to outpatient facilities over inpatient facilities for these services can yield even greater savings and a better patient experience.

To get the most benefit out of steerage some employers have been switching from traditional group health insurance to self-insured direct-to-employer health plans. These plans will centralize employees’ health care with an integrated provider network or hospital group that focuses on coordinated care, which can reduce overall costs and improve the quality of care.

Since the employer is self-insured, they can work with a health system to establish an integrated care strategy that puts a premium on steerage.

Getting a handle on drug spending

Pharmacy benefit costs are the fastest-growing part of health care costs, up an estimated 8.4% in 2023, according to the Mercer “National Survey of Employer-Sponsored Health Plans.” And as new and more expensive pharmaceuticals hit the market, the portion of overall health care costs that goes towards medications will continue to rise.

One contributor to the increasing prices that your staff pay for their medication may be the pharmacy benefit manager that your insurer uses. Many PBMs earn commissions on drugs dispensed to patients and they benefit from steering them to higher-cost drugs. As well, many PBMs steer patients to pharmacies that they own, further muddying the waters.

There is a way to cut through this mess, but it requires asking tough questions of your insurer and/or the PBM. Ask them how they earn their money, and what kind of commissions and margins they are earning on drugs dispensed to your employees. It’s best to take this approach with the assistance of us, your broker.

Having an honest discussion with your insurer and PBM can open opportunities to save on pharmaceutical outlays through various strategies, like using generic drugs instead of brand-name ones and ensuring that your workers get the full manufacturer rebates — and that they are not kept by the PBM.

Depending on the PBM, this may or may not work.

Helping your employees get healthier

The healthier your workers are the less they will need to access health care, meaning they will spend less for medical services.

Employers can help their employees by weaving in health and wellness education in their staff communications. As well, many wellness programs focus on improving health, including smoking cessation programs, weight loss programs and free or subsidized gym memberships.

Also, many Americans are not keeping up on preventive care visits, many of which are free under the Affordable Care Act. Keeping up on these visits can help stave off larger health problems in the future.

Sometimes what’s needed for your employees to take preventive care seriously is education. You can work with us to come up with communications strategies aimed at trumpeting the importance of these visits by focusing on improving overall health and cost savings in the long run.

The takeaway

The above strategies follow a trend in health care focusing on improved health outcomes for patients by better coordinating care, particularly for those with chronic conditions. For employers, the name of the game is keeping costs down for themselves and their staff while not sacrificing quality of care and while improving their workers’ health.

A surge in demand for pricey, new and highly effective anti-obesity medications could put a financial strain on employers who sponsor their employees’ health plans.

Employers have long offered coverage for certain weight loss tools, such as bariatric surgery if employees qualify for the drastic procedure that requires an operation. Other medications that have been on the market for some time have limited effect, don’t work for everyone and can have serious complications.

But a new class of drugs that has hit the market in the last few years has proven extremely effective in helping people lose weight. As a result, pharmaceuticals like Novo Nordisk’s weight-loss-specific Wegovy and Saxenda, and Ozempic — a diabetes medication from the same company — are now in high demand.

There’s one big catch: These drugs are very costly, putting employers in a quandary. They want to attract and retain high-quality talent, but they don’t want to break the bank on their employee benefits offerings.

A recent survey by the Obesity Action Coalition found that 44% of people with obesity would switch jobs if it meant gaining access to obesity treatment coverage. Likewise, 51% would stay in a job they didn’t like to have access to the coverage.

These findings are significant considering how much these drugs cost and the fact that once someone starts taking them, if they stop, they will usually start gaining weight immediately.

What are these drugs?

This class of pharmaceuticals, known as glucagon-like peptide agonists (GLP-1s), have shown to be highly effective in helping people lose excess weight.

Since news spread of how effective they are, demand for these medications has skyrocketed.

Just three years ago, few people had heard of these drugs and they were not often prescribed, but that’s all changed.

For example semaglutide, which is known under the brand names of Ozempic, Wegovy and Rybelsus, was the fourth-most prescribed drug in terms of total costs in 2021 at $10.7 billion, an increase of 90% from the year prior, according to a report in the American Journal of Health-System Pharmacy.

While many of these drugs are injectable, some like Rybelsus come in pill form.

Shocking costs

Experts warn that if more workers seek out these drugs, payer outlays will spike, resulting in higher group health plan premiums for employers.

The list price of Wegovy is $1,350 per package, which breaks down to about $270 per week — or $16,190 per year.

That said, obesity has its own significant costs and proponents of these medications point at the potential for reduced costs on the back end if people lose weight and keep it off.

Medical costs of obesity in the U.S. were $173 billion in 2019, according to the Centers for Disease Control.

An unsustainable trend

It’s estimated that about 60% of large employers’ health plans cover one of these drugs, although with restrictions, including minimum body mass index (BMI) requirements and prior authorization.

Health plans may require enrollees who qualify for obesity care to first use other lower-priced anti-obesity drugs before they move to a GLP.

The American Gastroenterology Association recommends weight loss drugs for anyone who has a BMI over 30, or 27 if they have other medical complications, such as heart disease or diabetes. According to the CDC, 42% of Americans have a BMI over 30, which is considered clinically obese.

As the uptake of these drugs increases, employers and their health plans will need to make painful choices of to what extent the medications should be covered. Insurers are already considering ways to ensure that people who will most benefit from these drugs have access to them.

Studies have found that nine out of 10 employees opt for the same benefits every year and that around a third of workers don’t fully understand the group health plan benefits they are enrolled for.

Staying in the same plan after year can be a waste of money if someone is in the wrong plan for them. And not understanding benefits can lead to wasted money as well, as workers often skip necessary appointments, check-ups and treatment regimens for chronic conditions, which in turn puts their health at risk.

As coverage has grown in complexity over the past decade, it’s important that you provide the resources for your employees to choose the health plan that is best for them. Here are three tips that will help them get the most out of their benefits.

Don’t skimp on explaining

While some employees’ eyes are bound to gloss over while someone is explaining the various plan options, their networks, their copays, deductibles and more, it pays to take the time to explain them step by step.

That means breaking the benefits down to the basics in language anyone can understand. Avoid getting bogged down in health insurance jargon and keep it simple. The simpler the better.

Don’t think of it as talking down to your employees, because there’s a good chance some of them are not familiar with how health coverage works. Encourage questions, by telling them there are no stupid questions. Invite employees to speak one-on-one with your benefits point person if they have questions they’d rather ask privately.

Make benefits communications all year long

When the new year starts and open enrollment is in the mirror, most employers don’t reach out to staff until a few weeks before the next year’s enrollment period starts.

Plan now for regular benefits communications throughout next year. Send them e-mails and materials during the course of the year that remind them to consider how their current coverage is measuring up to their needs.

This is especially important if someone’s health situation changes. They may be looking to make a change during the next open enrollment, and feeding them periodic memos about their coverage can help them educate themselves and prepare.

Communications could include explainers about cafeteria plans, health savings accounts, how to use their health benefits wisely, and more.

Know your crew

After open enrollment, run a report looking at what plans your employees are signed up for and see if they are concentrated in certain plans. Many employees when choosing health plans ask their co-workers, which often leads to them choosing a plan that is not optimum for them since there are many factors that may vary, including:

• Their age.
• Whether or not they are married.
• Whether or not they have children.
• Their health situation.

That’s why it’s important to run some analytics on your employees’ health plan choices. We can work with you to make sure that they are in the right plans and identify what might be a better alternative for them.

For example, in many cases, the younger and healthier someone is, the best choice may be a high-deductible health plan with lower premiums, tied to an HSA. Older employees and those with health conditions — those who are more likely to use medical services and be on medication — may need a plan with a lower deductible.

The takeaway

It benefits both your employees and you if your employees are in the appropriate plan for their life and health situation.

Fortunately, you can ensure that they understand their benefits by understanding their needs and helping them learn about their benefits throughout the year.